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SWOT Analysis

SWOT Analysis

What is this?

Albert S Humphrey invented this method in the early 60's. It’s a technique that helps you map your Strengths and Weaknesses, and understand the Opportunities and Threats you could potentially encounter.

When is this tool used?

SWOT was originally designed to help businesses assess their situation to be able to plan, yet it can still be used on different levels, including assessment of personal growth. Potential uses include: choosing the best path for your organization, exploring possibilities for new solutions and refining plans.

How is this tool used?

In order to use this tool, download the SWOT analysis template from here.

Step 1 (Identify your internal factors (Strength and Weaknesses)):

Write down characteristics that your organization has. Those characteristics may be in your favor as strength or against you as point of weakness. While evaluating your business always rely on facts not opinions.
 

While writing your strengths, focus on areas where your company is strong at. For instance a cupcakes bakery located in Nasr City, their strengths could be their location, as this area doesn't have a lot of cupcake providers. Also, the area is known for shopping malls and this could draw in Nasr City visitors and shoppers.
 

On the other hand weaknesses should include areas that your business could improve. A digital marketing startup could face challenging weaknesses such as weak brand recognition and external relationships as new provider in the market. By trying to answer the following questions you’re getting a deeper look on your internal factors:

Step 2 (Identify your external factors (Opportunities & Threats):

What you can take advantage of, is an opportunity and what will harm your business, is a threat. When listing your opportunities you need to think of market changes, availability of new technologies, new customer segment and any other aspect that can assist your business to succeed. One of the opportunities for a fast food chain could be an increasing number of working families that do not have time to cook or eat at home and need good quality food at work.

Additionally, when listing your threats, consider economic downturn, new competitors, labor issues or anything that could threaten your business. Again for the fast food chain, they could be threatened by a large number of competitors and indoor food courts at corporates.​ Write answers to questions about your situation. Be realistic as much as you can. Examples of these questions include:

Step 3 (Evaluate your four factors):

Take a look at your findings. Start analyzing how you can grow based on your strengths and opportunities, and how you can minimize the impact of the weaknesses and threats on your business. You may also try to think how you can turn them to strengths or opportunities.

Hints for using this tool

While evaluating the four factors, think of it from the competitor’s perspective. For example if your strength is high product quality and your competitor has that too, then it is not a point of strength. Avoid getting trapped within endless lists; you can list between 4-6 items in each category.

Case Study

Laila has a startup that tailors and sells dresses. She is considering shifting to handmade accessories. Laila carried out the SWOT analysis exercise.

First, she takes a look at the SWOT internal factors. Listing her business's strengths, Laila has a good network of ladies who buy from her and recommend her dresses to their friends. She has the know how of accessory and fashion design.
For the weaknesses, she doesn't know any good suppliers in terms of cost and quality. Additionally, she won't be able to rent a shop due to the high cost of real estate.

Secondly Laila works on the external factors. The market opportunities are: that customers are now driven towards handmade products and customized accessories in general, in addition to her ability to market and sell her products online with the spread of internet selling in Egypt. The business threats can mainly be concluded as the threat of new competitors in the market that will reduce her market share.
Here is Laila's SWOT diagram.

Now Laila has a clearer image of her new business status. She decides to offer customized products in order to minimize the threat of new competitors. Aiming at high profit margins and minimizing rental cost, she decides to market and sell her products online for her already existing clients. Laila will need to do a good research in order to get affordable offers from suppliers. Knowing where she is and where to start from, Laila can now kickstart her startup and explore new areas of the market.

Pros and Cons

On one hand the tool is simple to do and practical to use, gives you clear understanding and helps you identify your future goal. On the other hand there isn’t a clear method to distinguish between strengths and weaknesses, opportunities and threats. SWOT analysis cannot be used alone, has to be incorporated in different contexts (political, technological, economic and social).

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